Question

instructions: read the following scenarios and answer the question in the space provided.
scenario
soybean oil can now be used as a renewable ingredient in the production of biodiesel fuel.
wheat is grown primarily to be ground into flour. drought results in low wheat yields.
the bird flu infects thousands of egg farms, and many laying hens are lost.
the nutrition of feed for dairy cows improves, leading to a significant increase in milk production.
graph (draw original supply + demand lines, add the shift, be sure to mark s and d and d² or s² as needed, plus equilibrium points)
supply or demand change? (circle)
price - ↑ or ↓
quantity - ↑ or ↓
why is there a change? (merit)
supply
↑
↑
increased profitability
demand
↓
↓
less alternative uses for demand
supply
↑
↑
supply reduce potential price induced
demand
↓
↓
supply
↑
↑
supply reduced demand reduced
demand
↓
↓
supply
↑
↑
more production
demand
↓
↓

Explanation:

Step1: Analyze soybean - oil case

The new use of soybean - oil in biodiesel production increases its profitability for producers, so supply increases (shift of supply curve to the right). At the same time, as it is used more for biodiesel production, there is less for other uses, so demand for its other uses decreases (shift of demand curve to the left).

Step2: Analyze wheat case

Drought reduces wheat yields. This leads to a decrease in supply (shift of supply curve to the left). Assuming no major changes in factors affecting demand immediately, demand remains relatively constant in the short - run, but the text has a wrong marking of demand decrease. In reality, with supply reduction, price increases and quantity decreases.

Step3: Analyze egg case

Bird - flu infecting egg farms reduces the number of laying hens, so supply of eggs decreases (shift of supply curve to the left). Also, consumers may be less willing to buy eggs due to health concerns, so demand decreases (shift of demand curve to the left).

Step4: Analyze milk case

Improved nutrition of dairy - cow feed leads to more milk production, so supply increases (shift of supply curve to the right). Assuming no major immediate changes in factors affecting demand, demand remains relatively constant in the short - run, but the text has a wrong marking of demand decrease. In reality, with supply increase, price decreases and quantity increases.

Answer:

Scenario	Supply or Demand Change (Circle)	Price (↑ or ↓)	Quantity (↑ or ↓)	Why is there a change?
Wheat	Supply (↓), Demand (constant in short - run)	↑	↓	Supply reduced due to drought
Eggs	Supply (↓), Demand (↓)	Depends on magnitude of shifts	Depends on magnitude of shifts	Supply reduced due to bird - flu, demand reduced due to health concerns
Milk	Supply (↑), Demand (constant in short - run)	↓	↑	More production due to improved feed nutrition